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November 12, 2002

Report: State budget debate should focus on restraining Medicaid spending

State lawmakers confronting a 2003-04 budget gap estimated to be at least $5 billion should focus on Medicaid, the single largest factor driving state spending, a new analysis by The Public Policy Institute of New York State argues.

"New York faces a major budget gap for one reason: overspending," The Institute said in the latest report in its Budget Watch '03 series. "And, more than anything else, one program - Medicaid - is responsible for this gap." The report can be found at
www.ppinys.org/budget/budget_watch_03e2_medicaid.pdf

And restraining Medicaid spending, the report added, was the key to the state's successful efforts to address a comparable fiscal challenge in 1995. "That success can be the model for 2003," the report said.

The Institute, the research affiliate of The Business Council, launched Budget Watch '03 earlier this month to focus attention on spending issues that are at the root of the state's looming fiscal challenge. The reports, which will be issued once or twice a week as the state budget debate unfolds, are all posted at www.ppinys.org/bwatch03.htm.

The report noted that New York's Medicaid spending this year will total $36 billion - "more than the entire budget for each of 40 other states." With spending averaging $1,890 per resident, New York spends about two and a half times the national per-capita average on the program.

New York leads in Medicaid spending per capita, per recipient, in rates paid to providers, and in almost every Medicaid service spending category, the report noted, citing state Division of the Budget document published three years ago.

"Since then, our Medicaid spending has continued to grow by leaps and bounds," the report added. "This year's figure is up more than 21 percent - a staggering $6 billion - from the 1999-2000 fiscal year."

The report also noted that Medicaid also drives up local taxes, because state lawmakers long ago required county governments to pay part of the costs.

"The rising cost of Medicaid is one reason our local taxes are the highest in the nation - and why New York City and counties across he state are planning big tax increases," the report said.